Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Wednesday, May 25, 2011

Can informal relationship involving confidence and trust give rise to fiduciary duty?

BREACH OF FIDUCIARY DUTY: INFORMAL VS. FORMAL FIDUCIARY RELATIONSHIPS Fiduciary duties may arise from certain formal relationships that are considered to be fiduciary as a matter of law or from informal, “confidential” relationships. Id. at 275. To recover on a claim for breach of fiduciary duty, one of the elements that must be established is the existence of a fiduciary or confidential relationship. Id. The existence of such a relationship is ordinarily a question of fact, but it becomes a question of law when there is no evidence on the issue. Id. Texas courts are reluctant to recognize informal fiduciary relationships. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997); Jones v. Thompson, ___ S.W.3d ___, ___, 2010 WL 3157145, at *8 (Tex.App.--El Paso Aug. 11, 2010, pet. denied). Accordingly, not every relationship that involves a high degree of trust and confidence will give rise to a fiduciary duty. Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex. 2005). Because subjective trust is insufficient to create a fiduciary relationship, the mere fact that one party trusts another does not transform a business arrangement into a fiduciary relationship. Id. at 331. The trust must be “justifiable.” Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1963). When “one person is accustomed to being guided by the judgment or advice of another or is justified in believing one will act in the best interest of another because of a family relationship, a confidential relationship may arise.” Trostle v. Trostle, 77 S.W.3d 908, 914 (Tex.App.--Amarillo 2002, no pet.). The existence of a confidential relationship depends on the “actualities” of the particular relationship. Thigpen, 363 S.W.2d at 253. The confidential relationship must exist prior to, and apart from, the transaction that forms the basis of the lawsuit. Meyer, 167 S.W.3d at 331; Hamblet v. Coveney, 714 S.W.2d 126, 129 (Tex.App.--Houston [1st Dist.] 1986, writ ref’d n.r.e.). One party’s lack of fluency in English does not create a confidential relationship. Salinas v. Beaudrie, 960 S.W.2d 314, 320 (Tex.App.--Corpus Christi 1997, no pet.). Nor do uncles and nephews necessarily have a confidential relationship. See Tex. Bank & Trust Co. v. Moore, 595 S.W.2d 502, 508 (Tex. 1980). And subjective trust will not suffice unless the trust was justified. See Meyer, 167 S.W.3d at 331. Compare Flanary v. Mills, 150 S.W.3d 785, 794 (Tex.App.--Austin 2004, pet. denied)(evidence sufficient where parties had uncle/nephew relationship, but they were more like brothers, one party worked for the other and had always “looked up” to him, and they had previously been business partners), and Dominguez v. Brackey Enters., Inc., 756 S.W.2d 788, 791 (Tex.App.--El Paso 1988, writ denied)(evidence sufficient where parties had a longstanding business and personal association and one party was accustomed to being guided by the other’s advice in legal and accounting matters), and Hamblet, 714 S.W.2d at 129 (evidence sufficient where two parties had aunt/niece relationship, they and their families had a close relationship spanning years, and one party counseled the other for years), with Thigpen, 363 S.W.2d at 249, 252-53 (evidence insufficient where parties were close friends who saw each other frequently and one party personally guaranteed a loan for the others and gave them business advice), and Trostle, 77 S.W.3d at 914 (evidence insufficient where parties had stepmother/stepson relationship, but they were not particularly close). SOURCE: El Paso Court of Appeals - 08-09-00084-CV - 4/29/11